Nigeria: … Infrastructural Challenges Raise LPG Price

Except the issues of high cost of foreign exchange, poor logistics, lack of investment, infrastructural challenges, and limited terminals are urgently addressed, the price of Liquefied Natural Gas (LPG) or cooking gas will continue to rise, according to stakeholders.

Already, the price of refilling a 12.5kg gas cylinder has increased from N2, 500 to between N2, 800 and N3, 500, depending on the location. Also, the price of refilling the 4kg gas cylinder, which used to be N800, is now going for N1, 200 and N1, 500. Twenty metric tonnes of the LPG, which cost N2.4m few weeks ago, has increased to over N3.5m.

Sources told The Guardian that only two gas terminals: NAFGAS Terminal and the Northern Oil Jetty (NOJ), which are managed by Products and Pipeline Marketing Company (PPMC), were the only terminals designated to supply gas in Nigeria. However, the terminals are not only limited, but were made to give priority to the supply of white products such as petrol and kerosene. This has, therefore, made it difficult for LPG vessels to discharge their contents promptly.

Speaking with The Guardian, Dayo Adeshina, President of the Nigeria Liquefied Petroleum Gas Association (NLPGA), attributed current challenges to inadequate gas infrastructure, lack of access to funding, safety and conflicting regulatory framework. He also attributed the hike in gas price to the high cost of foreign exchange. “Though the off-takers don’t buy the product with foreign exchange, but they pay the equivalent in Naira,” he explained.

He said the disruption in the LPG supply chain was because PPMC terminals were multi-product jetties, which give preference to petrol ahead of all other products. He explained that while a vessel of LPG has capacity for 13,000 tonnes, Navgas storage capacity could only accommodate 8,000 tonnes, leaving an outstanding of 5,000 tonnes.

“By the time the vessels return to the PPMC terminal, vessels conveying petrol would have berthed. And because Premium Motor Spirit takes precedence over other products, the vessel would have to return to Bonny to load more products, in order not to incur demurrage charges. Unfortunately, in the process of this time lag, prices go up,” he explained. Adeshina said the challenge at hand is more of logistics, appealing to depot owners to allow vessels berth in order to resolve the issues.

He underscored the need for the country to identify ways in which investment in the LPG sector can be easily promoted.

On how to resolve the issue of lack of investment and infrastructural decay in the gas sector, Dada Thomas, Chief Executive Officer, Frontier Oil Limited, said gas prices in Nigeria have been relatively low for more than 40 years, compared to markets around the world, making gas business in the country unattractive, especially to international oil companies.

He said: “I remember as far back as 1980, when I built my first gas plant as a young engineer working for Shell in Port Harcourt, the project was plagued with frequent stoppages due to funding problems caused by the very low gas price at that time.”

He lamented the lack of robust and widespread gas transportation and distribution pipeline system, which he said, would allow the source and producer of gas, often located in the Niger-Delta, to be connected to the consumer of gas, the bulk of which are located in the South West or other faraway places.

In his view, Nigeria must rapidly roll out a gas distribution pipeline system. This, he said, will require collaboration between the private sector and government, while the actual implementation must be by the private sector.

“Such pipeline systems must be operated and owned by independent private sector entities, but subject to an open access and economic basis so that gas producers can key into the nearest pipeline and gas swaps can become a reality in Nigeria, allowing gas producers to sell directly to consumers, regardless of their locations, while the pipeline transmission company (ies) would collect a tariff for delivering gas to the end consumer.

“In spite of the fact that we currently lack adequate pipeline transportation and distribution system, the disturbing thing is that the little we have has been subjected to attack and sabotage over the last five years, a phenomenon that has helped to create this crisis,” he said.

To him, there is clearly no rationale for any reasonable person to vandalise a gas pipeline, as the consequence is far worse than vandalising an oil pipeline. “Yet throughout the last five years, gas (and oil) pipelines were consistently vandalised, forcing the various power plants connected to such gas pipelines to shut down, resulting in the frequent blackouts the nation has experienced, despite the huge amounts spent on new power plants and pipelines”, he said.

Source: The Guardian

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